If research and development milestones are successfully met in the programme, ExxonMobil expects to spend more than $600m (£365m), which includes $300m in internal costs and potentially more than $300m to SGI.

‘This investment comes after several years of planning and study and is an important addition to ExxonMobil’s ongoing efforts to advance breakthrough technologies to help meet the world’s energy challenges,’ said Dr Emil Jacobs, vice-president of research and development at ExxonMobil Research and Engineering Company.

‘Meeting the world’s growing energy demands will require a multitude of technologies and energy sources.

‘We believe that biofuel produced by algae could be a meaningful part of the solution in the future if our efforts result in an economically viable, low net carbon-emission transportation fuel.’

ExxonMobil claims to have invested more than $1.5bn over the past five years on activities designed to improve energy efficiency and reduce greenhouse-gas emissions.

The company said some of these initiatives include technologies to improve automobile efficiency, such as tyre liners that keep tyres inflated longer, advanced fuel-economy engine oil and light-weight automobile plastics.

Some recent technology developments from the company include an improved lithium-battery separator film for hybrid electric cars.

ExxonMobil is also sponsoring research into ways to improve solar energy, biofuels and carbon capture and storage.

‘The real challenge to creating a viable next-generation biofuel is the ability to produce it in large volumes, which will require significant advances in both science and engineering,’ said Dr J Craig Venter, chief executive of SGI.

‘The alliance between SGI and ExxonMobil will bring together the complementary capabilities and expertise of both companies to develop innovative solutions that could lead to the large-scale production of biofuel from algae.’

ExxonMobil’s role in the research will involve developing systems to increase the scale of algae production through the manufacturing of finished fuels.

Jacobs said ExxonMobil conducted ‘considerable’ studies to determine the potential advantages and benefits of biofuel from algae.

‘Among other advantages, readily available sunlight and carbon dioxide used to grow the photosynthetic algae could provide greenhouse-gas mitigation benefits,’ he said.

‘Growing algae does not rely on fresh water and arable land otherwise used for food production.

‘And lastly, algae have the potential to produce large volumes of oils that can be processed in existing refineries to manufacture fuels that are compatible with existing transportation technology and infrastructure.’

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